Method and apparatus for providing incentives to physicians under an accountable care model

ABSTRACT

The present invention provides a method of providing a monetary incentive to a health care provider, typically a physician, responsible for treatment decisions of a patient with a condition during an episode of care. Once the patient identity and condition are obtained, a baseline value related to treatment of the condition can be associated. Thereafter, all the claims processed during the episode of care of the patient for the condition can be summed to obtain a total treatment cost. If the total treatment is less than the baseline value, then a monetary incentive can be provided to the provider based upon that episode of care. The healthcare provider may be a member of a managed care organization, such as an accountable care organization, and the monetary incentive may be modified based on time interval for the episode of care.

CROSS-REFERENCE TO RELATED APPLICATIONS

The present invention is a Continuation-In-Part of U.S. patentapplication Ser. No. 12/117,632, filed on May 8, 2008, which is aContinuation of U.S. patent application Ser. No. 09/648,582, filed onAug. 25, 2000, entitled “Method and Apparatus for Providing Incentivesto Physicians,” now issued as U.S. Pat. No. 7,389,245, both of which areincorporated herein by reference in its entirety.

FIELD OF THE INVENTION

The present invention relates to a method and system for providingincentives to physicians, and, more particularly for ascribing abaseline value to instances of care, and rewarding physicians fortreating a specific instance of care for an amount less than thebaseline value.

BACKGROUND

The health care industry provides medical treatment to the population atlarge. The insurance industry is in the business of sharing risk. Bothof these industries are forced to work together when it comes todetermining health care premiums for individual patients. Over theyears, the health care industry has been able to provide betterpreventive care, as well as more sophisticated treatment, which all comeat a cost and tends to increase health care premiums for individuals.

Kaiser Permanente is an example of merging a health care system and aninsurance company into a single entity. Began in the 1940's, a premiseof the merger of the health care system with the insurance company wasthat it would have an increased oversight capability, and thus be ableto reduce cost. In order to do this, however, participants in the systemwere required to use physicians and services provided from within thatsystem, thus reducing the choice that the consumer has to select his orher own physician.

At the other end of the spectrum is a system where the healthcare systemand insurance company are entirely separate. The insurance companyprovides insurance to the customer, and the customer can then freelychoose physicians, course of treatment and the like, and a fee for theservice is paid by the insurance company to the provider. While such asystem allows greater choice, it also results in greater costs.

Between the above two types of systems are health maintenanceorganizations (HMO's) and managed care organizations (MCO's) that haveevolved. By allowing for member patients to choose from among a networkof physicians, facilities, clinics and the like that make up the HMO orMCO, savings are incurred, which thereby lower the overall cost, withsome of the savings being passed on to the member patients. In suchsystems, one of the manners of payment is based on “capitation,” inwhich the insurance company is paid a monthly fee by the patient or hisemployer, and the physician for that patient is paid some smallpercentage of that monthly fee. If the patient never receives anytreatment, then the physician obtains a windfall, but if the patientrequires more treatment than that covered by the monthly fee, thephysician takes an effective loss. The net result is that there is anincentive for the physician to keep their own costs as low as possible;many times, it has been argued, to the detriment of the health of thepatient.

In large part as a result of the capitation, what is known as“utilization review” has evolved, in which a particular formula isestablished to determine what care to provide in a specific case. Thus,for instance, even if a physician believes that a surgery is needed,utilization review may determine that a specific test with a particularresult is needed in order to qualify for that surgery. As a result thereis a negative means to keep costs down.

Point of service (POS) plans have also been developed with the intent toallow a greater freedom of choice of physicians and free access to thatphysician than are available in a capitation system. Typically moreexpensive than an HMO, a POS plan is intended to allow the patient tochoose the physician of choice, and the insurance company agrees to paysome percentage, such as 80% of fees incurred, after some deductible. Inpractice, these plans typically do not reimburse the full percentagethat was “agreed” to, in large measure due to “usual and customary” feesthat the insurance company uses to determine the fees for proceduresperformed, which are typically less than the fees charged by thephysician the patient chose. The net effect, therefore, is toincentivize the patient to use in-network physicians, which physiciansthe insurance company can then exert more control over in terms of theirfees and costs, or cause the patient to bear more of the costs directlyout of the patient's own pocket.

The accountable care organization (ACO) has recently been developed as atype of payment and delivery model that seeks to tie providerreimbursements to quality metrics and reductions in the total cost ofcare for an assigned population of patients. The ACO model builds on theMedicare Physician Group Practice Demonstration provided by the Centersfor Medicare and Medicaid Services (CMS). An ACO generally comprises agroup of healthcare providers that jointly held accountable forachieving measured quality improvements and reductions in the rate ofspending growth. ACO's may involve a variety of provider configurations,from integrated delivery systems and primary care medical groups tohospitals.

A great deal of debate is generated regarding which type of planprovides the optimum balance between patient care and controlling ofcosts. In the meantime, attempts to contain costs continue to increaseand systems have been developed to assist in containing costs. Whilecapitation fees are one form of reimbursement, organizations have alsoprovided incentives to groups of doctors. In one more recent form ofincentive, if, based on all of their patients, the total fees and coststhat have been incurred by the group are below the projected amount anincentive is paid. While such a system provides an incentive for thegroup to keep fees and costs low, such a system does not, on an episodeof care basis for a particular patient, correlate the total cost of theservices provided to a particular incentive. Accordingly, there is nodirect correlation between the incentive and the specific care providedto a particular patient. Further, given the systems as described above,with an emphasis on lower costs, abuses unfortunately occur. As a resultthe health care system has become perceived as providing less thaneffective treatment to patients, with ever increasing costs that are inmore and more instances passed on to the patient.

SUMMARY OF THE INVENTION

It is an object of embodiments to provide a system that incentivizesproviders, and specifically responsible physicians, to provide effectivecare on an episode of care basis for each individual patient.

It is a further object of embodiments to identify a single physician whois responsible for the primary decision on the appropriate treatmentpath for each episode of care for a patient, and to then incentivizethat physician to provide effective care for that episode of care basisfor that patient.

It is a further object of embodiments to allow an outside partyadministrator to implement the incentive plan, thereby maintaining asystem of checks and balances between the physicians or other healthcare providers and the insurance companies.

It is a further object of embodiments to provide a substantiallyautomated system that determines a responsible provider and theincentives from data associated with the episode of care for theparticular patient.

It is a further object of embodiments to account for efficient deliveryof care by accommodating shorter time intervals in delivering diagnosisand treatment for an episode of care.

It is yet a further object of embodiments to accommodate combiningincentives with medical provider groups that may provide a separatebasis of incentives for cost-reductions and efficient medical treatment,and with whom the physician may be affiliated.

Embodiments of the present invention are capable of attaining theabove-recited objects, and others, either separately or in combinationas defined in the claims below. In general, however, the inventionprovides a method of providing a monetary incentive to a health careprovider, typically a physician, responsible for treatment decisions ofa patient with a condition during an episode of care. Once the patientidentity and condition are obtained, a baseline value related totreatment of the condition can be associated. Thereafter, all the claimsprocessed during the episode of care of the patient for the conditioncan be summed to obtain a total treatment cost. And, if the totaltreatment is less than the baseline value, then a monetary incentive canbe provided to the responsible provider based upon that episode of care.

The present invention also is able to provide a method of automaticallyprocessing a plurality of claims data for a patient treated for acondition to determine a responsible provider, and in most systems aresponsible physician, for an episode of care. Initially, the providerswho ordered procedures for the patient are identified. Then, a definingprocedure is identified for the condition, if such a defining procedureexists. If the defining procedure exists, then the provider whoperformed the defining procedure is assigned as the responsibleprovider. If the defining procedure does not exist, however, thatprovider who was responsible for incurring a predetermined percentage ofcosts for the episode of care can be assigned as the responsibleprovider, however, there may also be other ways to determineattribution.

Embodiments also include accommodation of combining incentive paymentswhere the responsible provider is a member of a medical provider groupwith whom a portion of the portion of the cost savings to be sent to theresponsible provider is shared.

BRIEF DESCRIPTION OF THE DRAWINGS

These and other objects and advantages of the present invention, alongwith the best mode for practicing it, will become apparent to thoseskilled in the art after considering the following detailedspecification, together with the accompanying drawings wherein:

FIG. 1 illustrates the overall method if providing incentives accordingto the present invention;

FIG. 2 illustrates an overview of the flow of data between partiesaccording to the present invention;

FIGS. 3A-3B1-2 illustrate samples of claim data and information added bythe incentive administrator according to the present invention;

FIG. 4 illustrates an example of the computer networks of variousparties according to the present invention;

FIG. 5 illustrates an overview flowchart of the incentive programaccording to the present invention;

FIG. 6A-1 illustrates an overview flowchart of preprocessing of claimsdata according to the present invention;

FIG. 6A-2 illustrates a flowchart of checking of claims data accordingto the present invention;

FIG. 6A-3 illustrates a flowchart of preprocessing logic adjustmentsaccording to the present invention;

FIG. 6A-4 illustrates a flowchart of adjusting previously closedepisodes of care according to the present invention;

FIG. 7 illustrates a flowchart of grouping claims data according to thepresent invention;

FIG. 8A-1 illustrates an overview flowchart of post-processing of claimsdata according to the present invention;

FIG. 8A-2 illustrates a flowchart of episode payment group encodingaccording to the present invention;

FIGS. 8A-3(1-4) illustrates a flowchart of game checking grouped claimsdata according to the present invention;

FIG. 8A-4 illustrates a flowchart of post-processing logic adjustmentsaccording to the present invention;

FIG. 9A-1 illustrates a flowchart of determining a responsible physicianaccording to the present invention;

FIG. 9A-2 illustrates a flowchart of determining a default physicianaccording to the present invention;

FIG. 10 illustrates a flowchart of outlier determination according tothe present invention;

FIG. 11 illustrates a flowchart of determining comorbidity according tothe present invention;

FIG. 12 illustrates a flowchart of determining savings for an closedepisode of care according to the present invention; and

FIG. 13 illustrates a flowchart of providing incentive paymentsaccording to the present invention.

DETAILED DESCRIPTION

Embodiments are described for a method and system by which a specificphysician is rewarded for reducing costs related to a specific episodeof care for a specific patient. An aspect of the embodiments include anautomated system using claims data to determine both the physician towhom the incentive should inure, as well as the amount of the incentive.

As will be described, in contrast to a conventional system, as describedabove, where there exists an insurance company, here also referred to asa “payer,” and a “provider,” such as a physician, clinic, or hospital,present invention also includes an incentive administrator. Theincentive administrator performs the functions described hereinafterand, significantly, because the incentive administrator actsindependently of both the payer and the provider, and also shares in thesavings achieved, provides the checks and balances between the payer andthe provider that does not exist in a conventional association betweenpayers, such as insurance companies, and providers, such as physicians.Accordingly, while the incentive administrator, the payer, and theprovider are all interested in providing appropriate health care topatients, the present invention recognizes that it is the providers (inmost instances the responsible physician) that require the ability, onan individual patient basis, to independently make decisions on theappropriate treatment, but must also shoulder the responsibility forthose decisions.

Accordingly, an aspect of the present invention is to reward thoseproviders who have the greatest ability to substantially influence theoverall cost of treatment for an episode of care. By rewarding thoseproviders who have the greatest ability to influence the overall cost ofan episode of care for a patient, those providers can recognize abenefit if the most cost-effective ways are used in treating thepatient. Since, however, those same providers are subject to scrutinyand potential legal liability if they do not perform their servicesadequately, they already have an incentive to provide that care which isnecessary to maintain the health of the patient, not to mention theHippocratic Oath that physicians must take in any event. Also, thedescribed embodiments preferably use an essentially open panel, so thephysician must market their practice to patients, catering theirpractice the patients and potential patients in an open market,competing against other physicians. The quality of medical care would bea foremost component of any physician's marketing, thus providing yetanother reason to provide high quality care. Further, the inventionincludes a process to identify physicians who do not provide the carenecessary to meet accepted industry norms.

FIG. 1, illustrates a flow of funds between the various parties thatexist in the health care system according to the an embodiment. Asshown, in step 1, premiums are paid by a patient 10 to a payer 30. Thispayer 30 can be an insurance company, a self-insured employer, or otherorganization. As shown in step 2, certain of the fees received by thepayer 30 are paid out to different providers 20 for services rendered.The provider 20 can be a physician, hospital or other health careorganizations or providers.

The fee for service that is paid in step 2 can be based on the existingstructure between the payer 30 and the provider 20, or an alternatestructure that recognizes that advantages contained by the presentinvention. In any event, the present invention, for each different typeof episode of care, establishes a baseline value that is used todetermine the typical fee that would be paid for treating that type ofpatient. This baseline value can be varied in manners discussedhereinafter, and will also differ depending upon the geographiclocation, the cost of living, and other variables, none of which arepertinent to an understanding of the present invention. What ispertinent is that for a single episode of care, which may requirerepeated visits for the treatment of an illness and all of the tests andprocedures associated therewith, or maybe only require a single officevisit, there is a baseline value that is associated with each type ofepisode of care.

The total cost of each episode of care is determined as a result of thechoices made by the provider 20 and, in particular, a specific physicianor person who has control over the costs associated with that episode ofcare as described hereinafter. The difference between the total cost forthe specific episode of care and the predetermined baseline value forthat episode of care equals the resulting savings that have beenrealized. The resulting savings is then split between a provider 20 (inmost instances the responsible physician), the payer 30, and theincentive administrator 40, as illustrated by steps 3, 4, and 5. As alsoshown in FIG. 1, in a preferred embodiment of the present invention,this savings is split in equal thirds, such that each of the provider20, payer 30, and incentive administrator 40 retain one-third of theresulting savings. It is understood, however, that these percentages canvary as negotiated between the parties.

Embodiments may be implemented through one or more computer programsexecuted in a processor or computer based system. Initially, withreference to FIG. 2, there will be described at a high level the flow ofdata between the patient 10, the provider 20, the payer 30, and theincentive administrator 40. Thereafter, once this flow of data isunderstood, a more detailed explanation of the manner in which theincentive administrator 40 uses the data it receives to implement theincentive-based program according to the present will be described.

With reference to FIG. 2, there is shown that the patient 10 in Step 1receives a service from the provider 20, which can be a physician,hospital, or other health service organization. Based upon the serviceprovided by the provider 20, in Step 2, the provider 20 submits a claimto the payer 30 for that service. Each time the patient receives anyservice, whether that is a procedure performed by a physician, a testperformed by a laboratory, the filling of a prescription, or otherrelated services, a separate claim for each will be provided. Eachprocedure is identified, typically, by a code such as a CPT4 procedurecode. Further, many claims will contain a diagnosis code or codes, suchICD-9 diagnosis code codes, which can be used to assist in determiningthe condition of the patient automatically, as described furtherhereinafter. Also, certain claims may contain an NDC drug code,identifying the prescribed medication. The different claims for thatpatient are then aggregated when determining the total cost for anepisode of care. Furthermore, if a single patient is being treated formore than one type of condition, this may equate to more than 1 episodeof care, and thereby require that each submitted claim identify thespecific episode of care for which the patient is being treated.

The payer 30, upon receipt of the claim information, uses thatinformation to determine an adjudicated claim amount. Using thisadjudicated claim amount, the provider 30, as shown in step 3, can makea fee-for-service payment back to the provider 20, provide writtendocumentation relating to the adjudicated claim, and will also providethis same adjudicated claim information and the original claim to theincentive administrator 40. An example of the claims data that issubmitted by the payer 30 to the incentive administrator 40 isillustrated in FIG. 3A.

The incentive administrator determines, based upon the claim data foreach completed episode of care, whether any incentives should be paidaccording to the present invention's scheme, as described above.Incentive administrator 40 will preferably add certain additionalinformation to the claims data, as will be described in further detailhereinafter, in order to determine if an incentive payment should bemade and its amount. The information that is added to each claim and tothe aggregation of claims in an episode instance, however, isillustrated in FIG. 3B. Once that determination is made, the incentiveadministrator 40 will provide to the provider 20, as shown in step 4,post-analysis comparative data that allows the provider 20 to determinewhether, for various instances of different episodes of care, how theprovider 20 ranked as measured against baseline values. The postanalysis comparative data can also contain suggestions on how thatprovider 20 could change the manner in which services are provided sothat quality care can be achieved in a more cost-effective manner,thereby allowing that provider 20 to alter his practice in subsequentsituations, and thereby realize a greater incentive in such situations.Also, as shown in step 5, the incentive administrator 40 sends bonuspayment instructions to the payer 30 so that, if there has been asavings for that episode of care, as will be described furtherhereinafter, the payer 30 can use that information to determine theincentive payment to the provider 20 and the incentive administrator 40.

The use episodes of care is integral to part of incentive paymentcalculation. In addition to using episodes of care, the physicianpayment system can also include a way to reward the speed and accuracyof making a diagnosis as well, since quickly and accurately making adiagnosis can both improve the quality of care and make it lessexpensive. Matching the diagnosis code from an originally submittedmedical claim with subsequent diagnosis codes could result in anincentive payment under certain conditions. For example, gallbladderdisease can be treated very effectively once a correct diagnosis ismade. If a correct diagnosis is not made, other ineffectual treatmentsare offered, sometimes for months with only partial improvement.Providing an incentive to reach the correct diagnosis as quickly andnon-invasively as possible would improve care and reduce overall costs.Hence, correlation between the original code filed and the final code inthe episode, matched with the time between first visit and finaltreatment, would result in an additional incentive payment.

A second way that episodes-of-care payments could be enhanced would beby finding alternate, less invasive/costly ways to treat a givencondition (i.e. giving medicines rather than procedures, performing lessinvasive procedures rather than more invasive ones, “expectantmanagement,” and so on. Frequently the most effective treatments arealso the least invasive, and usually the least costly. An incentivepayment could also be offered to providers based on “steerage” to lessinvasive/costly treatments.

In an embodiment, the incentive payment process is correlated with “bestpractice” algorithms so that patients would know that they would beoffered legitimate treatments regardless of whether such treatments weremore or less invasive/costly. For example, permanent femalesterilization can be offered with an in-hospital laparoscopic techniqueor an alternative to in-office “tubal blockage” procedure that can bedone in a doctor's office at a much lower cost. Both methods areaccepted medical treatments, but offering the less expensive one couldbe incentivized as being a “less invasive” modality, and the doctorgiven an additional incentive payment.

The incentive payment system can also be used to encourage the use ofclinical judgment, which is often just as or more valuable thanexpensive, “gold standard” diagnostic tests. Giving doctors an incentiveto use their clinical diagnostic skills first (i.e. thorough medicalhistory and physical examination) can be rewarded greater throughincentive payments than those physicians immediately resorting toexpensive lab or radiology studies, sometimes without seeing the patientbeforehand. For example, migraine headaches can usually be diagnosed bya careful neurological history and exam. Once a preliminary diagnosis ismade, the patient can be treated with medicines specifically targetingmigraine headaches. If the headaches respond to treatment, furtherdiagnostic testing (e.g., MRI of the head, etc.) is moot and can,therefore, be foregone. A doctor arriving at such a diagnosis andtreatment plan would be given an incentive payment. Best Practiceprotocols can be overlaid on such a system for the safety of thepatient. Specific medical codes or code-modifications can be used tostate whether he's either following a required Best Practice protocol orasserting a new one.

For this embodiment, Best Practices, sometimes codifiedorganization-wide (e.g., Kaiser, Cleveland Clinic, etc.) and sometimesestablished by national entities such as the AMA, specialty societies(e.g., American College of Ob/Gyn), or an academic medical center can beused as part of an algorithm along with the pure baseline/actual cost oftreatment model. For example, a doctor could receive an incentive forreducing the overall cost of treating/managing a diabetic patient overthe course of a one-year period. However, the doctor could also receivean additional incentive if he was able to manage the patient well enoughto maintain the patient's HbA1c at a level recommended by theappropriate Best Practices.

Use of data from an integrated health system, such as lab data, toassess whether a primary care doctor addressed all the noteworthy labfindings could also be a factor. For example, if a family doctor ordereda medical panel, and part of that panel was the test, HbA1c (ameasurement of long-term blood glucose levels), and the HbA1c wasabnormally high. The doctor would receive an incentive payment if he orshe recognized the problem, took steps to remedy it, and had the patientreturn and demonstrated proper treatment of the problem.

In general, much of proper health maintenance is focused on certaingoals (i.e. quitting smoking, losing 20 pounds, maintaining a normalblood sugar, etc.) that are set by a patient's physician, the patienthimself, a health plan, an employer, a “Best Practice” algorithm, orsome combination of these entities or individuals. Financial rewardspaid to doctors, an ACO (or other agent acting as an “incentiveadministrator”), and in some cases even the patients themselves, couldbe part of an overall incentive plan that would result in better healthfor patients as well as lower overall costs for the payor. In anembodiment, the achievement of such goals may reduce or prevent certaincosts associated with episodes of care, and may thus result in anincreased or additional incentive payment. Alternatively, merely settingand then achieving or exceeding such goals may result in incentivepayments under this system.

Following is an example of how the embodiment of incentivizing lowercosts within the context of an “episode of care” is intended to work.

Example

A specific example is provided to illustrate how embodiments of anincentive provider system is intended to work. In 1999, in amedium-sized town, there is a dominant insurance company, payer 30, and20 obstetricians who deliver 1,000 babies per year under the insurancecompany's health plans. Each obstetrician delivers an average of 50babies per year. The average fee for childbirth (all C-sections andconventional deliveries combined) has been $2,500 for the OB/Gyn fee,plus $7,500 for hospital care, laboratory, surgical assistant fees,consultations anesthesia fees for epidurals as well as generalanesthesia, pathology fees, normal newborn care, etc. Hence, an averageof $10,000 per baby, or $10,000×1,000 babies=$10 million per year whichis paid by the insurer for all obstetrical care. The twenty OB/gyns aregrossing $2,500,000 (or averaging $125,000 each) for obstetrical feesfor patients covered by this particular insurer.

Incentive administrator 40 works with the physician coordinator to cutcosts beginning on Jan. 1, 2000. There is a negotiated cut in fees by20% off current rates for both physicians and hospitals. If utilizationremains constant, it will now cost the insurance company a total of $8million, or a total of $2 million less than they are currently payingfor obstetrical care. Furthermore, utilization is reduced by having theteam leader actively working to cut utilization rates by the following:(1) reduce C-section rates; (2) shorten time spent in the hospital bothbefore and after delivery; (3) reduce unnecessary laboratory, pharmacyand sonogram utilization; (4) reduce usage of epidurals for labor (thiswill result in shorter labors, fewer C-sections and no anesthesiologistfee); (5) home health care is used for treatment of dehydration,pre-term labor and other antenatal problems; (6) better pre-natal careand wellness measures during the pregnancy. The list can go on and on.Overall, costs are reduced by another $1 million. Total savings are, forexample, 30%, or $3 million, off of the payer 30's annual obstetricalbill.

The payer 30 retains one-third of the overall $3 million savings, or$1,000,000, as “extra profit,” the incentive administrator 40 is paidone-third, or $1,000,000, to cover over head and profit, and theremaining one-third, or $1,000,000, is divided among the physicians.Amongst those physicians, it has been decided that a fraction of thesavings would be paid to the physician coordinator and the remainderwould be split among the 20 participating obstetricians on the basis ofcost savings achieved for each patient by the responsible physician. Theaverage rebate would be $40,000, but it would be distributed on thebasis of actual cost savings below a certain baseline. In this example,a baseline of $8,000 per delivery is used since this is the amount theinsurance company would spend if there were not savings beyond thepreferred provider discounts, and only 5 physicians A-E of the 20physicians are discussed.

An average physician, Dr. A, delivered 50 babies with an average cost tothe insurer of $7,400, a savings of $600 below the baseline. Dr. Bdelivered 60 babies with an average cost of $8,000, even with thebaseline. Dr. C delivered 40 babies with an average cost of $8,200, $200over the baseline. Dr. D delivered 50 babies at an average cost of$7,000, $1,000 below the baseline and Dr. E delivered 60 babies with anaverage cost of $6,500, $1,500 below the baseline. The product of thesavings per delivery and number of deliveries can be used to determinesavings for the period that each physician will get.

Savings Total Babies (below baseline) Savings Dr. A 50 600 30,000 Dr. B60  0 0 Dr. C 40 (200) 0 Dr. D 50 1,000   50,000 Dr. E 60 1,500   90,000Observations relating to these incentives are helpful to anunderstanding of the present invention:

Doctor A. She is an average saver. Her rebate of $960 per patient morethan makes up for the 20% she discounted off her fees to become apreferred provider. She, herself, is earning as much as ever but is alsobecoming a more efficient provider as far as overall costs areconcerned.

Doctor B. No rebate will go to him. The team leader could work closelywith him in the future to improve his cost effectiveness.

Doctor C. No rebate goes to him either. His practice has lower thannormal volume and he is actually incurring more costs for the insurer.Should he not change his practice patterns, the team leader could havethe power (and would have the incentive) to have him removed as apreferred provider.

Doctor D. Though his practice volume is average (50 patients), he issaving more than $1,000 in decreased utilization per delivery. He is, inturn, recouping far more than 20% discount he gave up to become apreferred provider.

Doctor E. He delivered a high volume, 60 babies last year. Nevertheless,he is by far the most cost-efficient provider among doctors A-E. Heprobably: has a very low C-section rate because of conscientiousmanagement of labor and delivery; anticipates problems and treats themeffectively early on; handles after-hours calls quickly by telephone orsees patients in his office, rather than sending them to the emergencyroom. To reward this physician for his extra skill, hard work andefficiency, he will receive a rebate of $144,000, or $2,400, for eachbaby he has delivered. He will actually be earning an average of $4,400per delivery, or 76% more than the current fee of $2,500.

Dr. E is being rewarded more because he is working smarter and harderthan anyone else. Traditional fee-for-service compensation by CPT coderewards all doctors similarly. However, under this system of the presentinvention, the more skilled and cost-effective practitioners arerewarded more than sloppy or inefficient practitioners.

Under the system, the physician coordinator can help all of the doctorsanalyze Doctor E's methods and apply them to their own practices. Theymay respond to incentives by emulating much of what Doctor E does andmay also add innovations of their own. The following year, several otherdoctors may be practicing as efficiently (or perhaps even moreefficiently) than Doctor E.

With the overall business method of the present invention having beendiscussed, other aspects of embodiments will now be described. Aspectsinclude those relating to the manner in which the incentiveadministrator receives and processes data from the payer 30 and thenprovides results back to the provider 20 regarding whether incentivesare due, how much they should be. Information is also provided back tothe provider 20 in the form of better practices information, as has beendescribed previously.

As has also been mentioned previously, an advantage of the presentinvention is that data that is electronically received can beautomatically processed in most instances although, as notedhereinafter, in certain instances manual review is necessary. Thoseinstances will be described hereinafter as well.

As illustrated in FIG. 4, very generally, there is shown a providernetwork 22, payer network 32, and an incentive administrator network 42,each of which can communicate with others through the internet 50 orsome other type of computer network. Each of the networks can contain,for example, a UNIX server on which a database is located, a UNIX webserver that allows for connection via the internet to various users, aswell as a Windows-based computer that allows for certain specificapplication programs to be run which are part of the present invention.It is understood, however, that the applications described hereinaftercan be written so that the various operations can take place on avariety of computers.

FIG. 5 illustrates an overview of the processing of claims data by theincentive administrator 40. This claims data is received weekly,monthly, or at some interval so that the claims data from the payer 30can be added to the previously received open or active data. As shown inFIG. 5, step 100 illustrates the inclusion of the new claims data to thepreviously received, and still existing, open data. By “open data” it ismeant specific claims for different patients for which the episode ofcare is still open. In this regard, there are conventionally knownvarious methods for determining whether an episode of care is stillopen. One method of determining whether an episode of care is open orclosed is to set a predetermined window in terms of the number of daysfrom the initial visit by the patient 10 with the service provider 20.The initial visit for an episode of care can be determined from theclaims data, and the period of time or window for closing that episodeof care can be determined based upon the earliest claim for that type ofepisode of care. Thus, as shown in step 100, the new claims data isadded to the previously received and still open active data. Thereafter,in step 200, this open data will be pre-processed, to take intoconsideration a number of factors as described further hereinafter. Oncethis open data is preprocessed in step 200, step 300 follows in whichthe data is grouped into specific episodes of care. Thus, all of thevarious claims for a particular episode of care associated with aparticular patient can be grouped together. The grouper uses theprocedure codes, the diagnosis codes, the drug codes, and otherinformation in the claims associated with each patient to identify thoseclaims that relate to a particular episode of care.

Once this data is grouped into particular episodes of care in step 300as described above, post-processing of the group data takes place instep 400. This post-processing will be described further hereinafter.Also, a step 500, which is shown as being subsequent to thepost-processing within step 400 but, in fact, can occur during a portionof the post-processing of group data as described hereinafter, willoccur. In step 500, a determination is made of the physician that isresponsible for the particular episode of care for the particularpatient. This step is significant since it is used in determining theparticular physician, or other provider 20, that is to receive anincentive, if one is to be given. Thereafter, in step 600 there is adecision step performed that determines whether errors exist in thedata. After having had an initial preprocessing, grouping, andpost-processing, there may be errors contained in the grouped data. Forexample, the step 490 post-processing logic adjustments can cause theclaims data to be altered, and the thus altered claims data willtypically need to be regrouped. Thus, when the post-processing logicadjustments are made, a regroup field can be set to indicate thatregrouping in step 600 is needed. This process repeats until there areno problems that remain to be edited.

Thereafter, step 610 follows in which it is determined whether any ofthe episodes that have been grouped together are now closed. If not,then the data associated with non-closed episodes is returned to theopen data set described in step 100 and will be used at the nextperiodic processing of the data.

For each closed episode, however, there then needs to be determinedwhether an incentive payment should be made. Initially, however, anoutliers test step 650 is performed, described further hereinafter, toremove episodes of care that are extremes. Once those are removed, instep 680 there is a step that adjusts for comorbidity, otherwise knownas effects of one illness that can exacerbate or make easier thetreatment of another illness. Once comorbidity is determined, then instep 700 there is a step of calculating the incentive payments, followedthereafter, by step 750 of making payments to various providers, thepayer, and the incentive administrator.

Having described, in FIG. 5, an overview of the processing that takesplaces automatically by the present invention, the details of thisprocessing will now be described. With reference to FIG. 6A-1, detailsof the preprocessing of claims data will now be described. Initially, asillustrated in FIG. 6A-1, in step 202, all of the open claims arecompared against each other to determine whether there are duplicateclaims. If there are any duplicate claims, those duplicate claims areremoved, as illustrated in halt step 206. For those claims that are notduplicates, they are then operated upon step 204, to determine whetherthere are any data exceptions. Such data exceptions include, forinstance, claims that are missing required values, claims that containinvalid codes, claims that contain non-sensical, coded combinations andtypes of claims for which the system has not previously identifiedbaseline, minimum and maximum cost of the associated procedures. Whilemost of these data exceptions can be tested for using conventionaltechniques, it is noted that it has been found useful to use a grouperto validate coded combinations, such as CPT and ICD codes. When thegrouper is used in this manner, a dummy group of new claims is made andcodes within the dummy group are reviewed to determine if the codestherein are valid. Claims for which there are data exceptions are alsoremoved, as shown by the halt step 205 for those claims, so that theycan be individually reviewed and the necessary data associated therewithadded.

Either using all of the claims that have passed through the dataexceptions test step 204 but, more preferably, using claims that havebeen corrected so that they now will pass through the data exceptionsstep 204, step 208 is used to identify new providers 20. As shown in theclaim data that is provided and shown in FIG. 3A, there is an entry fora particular provider 20 that is associated with each claim. Thisprovider may be the physician who is determined to be the responsiblephysician for this episode of care, as will be described hereinafter, ormay also be a different physician or provider that has ordered tests orprocedures for this patient as a result of this episode of care. In anyevent, step 208 identifies any new providers so that the incentiveadministrator database can be updated to take them into account.

Once new providers have been identified, step 210 follows, which willcheck for gaming as described hereinafter. In essence, gaming is a termcommonly used to describe conduct in which any system is manipulated byproviders to increase their monetary reward. Once gaming has beenchecked and has been identified, the claims data is adjusted based uponpreprogrammed logic rules, as will be described hereinafter in FIG.6A-3. After these logic adjustments have been made in step 230,adjustments are made for previously closed episodes in step 250. Theseadjustments for previously closed episodes will be described hereinafterin FIG. 6A-4.

Turning again to step 210, as described in FIG. 6A-1, FIG. 6A-2illustrates in more detail the gaming check that takes place. As shown,in step 212, each new claim is received and, in step 214, it isdetermined whether there is an entry for the claims procedure anddiagnosis codes in the “non-allowed table.” By “non-allowed table” ismeant a table contained within the incentive administrator's databasethat associates procedure codes with non-allowed diagnosis codes. Forexample, the diagnosis may be that a patient has broken a leg, and apermitted procedure is to order an X-ray, but a non-permitted procedurewould be an CT Scan. Accordingly, within the non-allowed table, thereexists the non-allowed pair of the procedure code for the broken leg,coupled with the diagnosis code for the CT Scan. Thus, any claim that isprocessed by the system that contains this combination of procedure codeand diagnosis code will not be allowed. Accordingly, if such a claim isfound, step 216 marks that claim as non-allowed and then continues tostep 218 to determine if there is another claim that needs to bepre-processed in this manner. If such a claim exists, that claim isinput in step 212 and the steps previously recited continue. If there isno other claim, then this gaming check that took place in step 210 isfinished, and step 230 follows thereafter.

FIG. 6A-3 illustrates in more detail the logic adjustment that takesplace in step 230. As illustrated, each of the claims is preferablyoperated upon by each of the business rules or logic adjustments thatthe system contains. Thus, they are input and then, in step 234, thebusiness rule test is thereon. This test is preferably implemented viaan AI Rule Engine. There can be as many as desired, or as few asdesired, business rules that operate upon the data. Specifically, theselogic adjustments are intended to make the claim data more accurate. Forexample, a cord PH test is one that is performed on newborn infants.However, when an infant is born there may not be a separate record inthe hospital's billing system for the newborn infant and, as a result,the cord PH test can be attributed to the mother. A business rule can begenerated that recognizes the miscoding of this test and automaticallyfinds the infant within the system or creates a new claim for theinfant, thereby recoding the claim for the infant rather than themother. While the above is just an example of such a business rule,there can be many others that are implemented in an effort to make theclaims data more accurate.

Step 236 illustrates the decision of whether the step 234 test found anydata that requires modification. If so, step 238 follows and themodification to the data is made. In the example previously given,changing the coding from the mother to the infant would be themodification of the data within step 238. Step 240 follows, anddetermines for that claim whether there is another business rule thatneeds to be applied. If so, the steps previously described areimplemented for that new business rule and, if not, then thepre-processing of logic and adjustments is completed.

Thereafter, as illustrated in FIG. 6A-1 at step 250 and in FIG. 6A-4 inmore detail, a step of adjusting for claims that refer to previouslyclosed episodes occur. Obtaining such a claim can occur, for instance,if there is a delay in transmitting the claim to the payor, if anepisode of care was in fact completed, but a physician billed for carethat was provided months after providing the care, or if an episode ofcare were closed, but there were reasons that it should not have beenwhich were not detected or detectable at the time the episode wasclosed.

Such situations are dealt with in the present invention, and FIG. 6A-4provides a preferred manner of dealing with them. As illustrated, instep 252, each claim is reviewed to determine if there is a date ofservice (DOS) that is earlier than the claim cut off date used in thelast processing. For each such claim that exists, the following stepsand decisions are made. Initially, in step 254, all the open and closedclaims for that patient are added to the new claims that have beenreceived. Then, in step 256, this subgroup of claims for this singlepatient are processed through the preprocessing step 200, the groupingstep 300, and the post-processing step 400 as described previously andhereinafter, and a temporary result set of episodes is determined.

Thereafter, a determination is made of each previously closed episode instep 258, and for each such episode the following steps and decisionstake place. In step 260, a decision is made whether in the temporaryresult set the same closed episode exists as had existed prior to thisnew batch of processing. If it did, then step 262 follows and adetermination is made whether the overall cost of this episode is thesame. If it is, then that previously closed episode does not requireadjustment, as noted by step 264, and then step 266 follows, which willbe described hereinafter.

If, in step 262 the total cost is not the same, then step 268 followsand an adjusted episode instance is created, which is marked as anadjustment to a previously closed episode, and a value of the adjustmentis determined. This adjustment to value is made using the new claimsdata, based upon the calculations for incentive payments as describedhereinafter. This adjustment is described within the logic of thisprocess at this time since the adjusted episode remains closed, but ofcourse could be determined with the other open claims that are thensubsequently closed. Once the adjusted episode instance is created, thenthe claims as they existed before the recalculation are saved in step270. This is done for record-keeping purposes so that the system candetermine why it had previously made incentive payments, as well asdetermine the new adjustment to that previously made payment based uponthe new claim or claims. Thereafter, in step 272, both the newly madeadjusted episode instance claims, and the previously made closed episodeinstance claims are archived, and step 266 follows, as will be describedhereinafter.

Referring again to step 260, if in step 260 it is determined that thereis not a closed episode in the temporary set that matches a previouslyclosed episode, then this means, as shown by step 274, that thepreviously closed episode should have remained open, or it should nothave existed. An episode should not have existed, for example, if theepisode was previously closed based upon one diagnosis, but the laterclaims now show that earlier diagnosis to be incorrect, and thus all ofthe claims need to be recalculated for that new diagnosis. As a result,step 276 follows and a new adjustment episode is made, which causes areversal of the previously closed episode, including any incentivepayments made. Thereafter, the claims related to the previously closedepisode are archived in step 278 for record-keeping purposes so that thesystem can determine why it had previously made incentive payments. Step280 follows thereafter and all of the claims are then moved to the openclaim area so that they can be together operated upon as new open claimsand step 266 follows

Step 266, mentioned above, and subsequent steps will now be described.As shown, a determination is made whether there are any other previouslyclosed episodes. If there are, then for each of those, step 260 and thesteps that follow as described above follow. If there are no previouslyclosed episodes, then step 282 follows and a determination is madewhether there is a new episode in the temporary set that did notpreviously exist. If there is a new episode, then step 284 follows andall of those claims are moved to a newly created episode instance andthen into the open (active) data set previously referenced at step 100,so that they can then be processed with the remaining steps as describedhereinafter, and then step 286 follows. If there was not a new episodedetermined in step 282, step 286 follows directly.

In step 286 it is determined if there is another patient with a date ofservice that less than the processing cut-off. If there is, then step252 and the steps following, as described previously, are performed foreach such patient and service. If there are none, then the adjustmentsto closed episodes step 250 is completed, and the process moves on tothe grouping step.

Once all of the pre-processing of claims data has been completed, asillustrated in FIG. 5 by step 200, then this data is grouped intovarious episodes of care in step 300, which will now be described withreference to FIG. 7. The grouping step is shown as a discrete step fromthe preprocessing step 200 and the post-processing step 400 since, inthe preferred embodiment, the grouping step 300 uses the EpisodeTreatment Groups grouper that is made by Symmetry Health Data Systems ofPhoenix Ariz. While the present invention can be implemented using anygrouper and other application software or systems that result in episodepayment groups (EPGs), at the present time using this Symmetry grouperto establish episode treatment groups (ETGs) that can, in turn be usedto establish episode payment groups (EPGs) as will be describedhereinafter, has been found effective. Thus, the preprocessing aspreviously described and post-processing as subsequently described takesinto account the use of this grouper, but the present invention is notlimited to being implemented with this grouper, but could be implementedwith other systems that can group into payment grouping episodecategories, directly or indirectly. It should also be noted that thisgrouper is being used in the present invention in a manner that isdifferent that the typical use of providing normative information. Thus,the manner in which the grouper is being used will be described in somedetail.

As illustrated in FIG. 7, the grouping step 300, shown more specificallyas step 350, performs an initial aggregation of claims to form episodeclusters that can then be aggregated into episodes, as well as to obtainrecord types for each claim to designate the category of expense.

With respect to forming episode clusters, the grouper determines, foreach patient, which claims to aggregate, and ultimately assigns theEpisode Treatment Group (ETG) code to each such episode. This is thestandard process that the grouper conventionally performs. Along withthe ETG code that is assigned there is also assigned an episode typeflag, which is a code that assists in indicating the degree ofconfidence in the accuracy of the episode instance. The episode typeflag code signifies a number of different types of characteristics ofthe episode being analyzed, but among the characteristics, the episodetype flag code allows for the determination of whether the episode isclosed or open. Thus, the episode type flag code can indicate, amongother things, whether an episode is should be categorized as beingcompleted, or closed, or still open.

Further, the claims data is analyzed so that each different claim can beattributed to a type of expense. Expenses are divided into categories,including categories for management expenses, pharmacy expenses,in-service hospital expenses and ancillary expenses. Claims classifiedby the grouper as management expenses have a correlation with the costsincurred by a physician at his office in treating a patient.Accordingly, while others manner of correlating costs incurred byphysicians for treating patients in their office can be used, thisinformation supplied by the grouper has been found useful in determiningthe responsible physician, as will be described hereinafter.

Further, as described above, the grouper is used as part of a cycle ofdata analysis. As described previously in step 600, after an initialpreprocessing, grouping, and post-processing, the grouped data isreviewed for errors. If there are any problems, the problems are edited,and then the preprocessing, grouping and post-processing is performedagain. This process repeats until there are no problems that remain tobe edited. Regrouping the same data a plurality of times is notconventionally performed, since the manner in which the grouped data isconventionally used is much different than in the present invention.

Thereafter, once the data has been grouped into episodes of care in step300, as illustrated in FIG. 5, the post-processing of grouped data takesplace in step 400, which will now be described with reference to FIGS.8A-1 through 8A-4.

FIG. 8A-1 illustrates the overall steps that take place in thepost-processing of the grouped claims data, as shown. In step 402,Episode Payment Group (EPG) encoding takes place. Thereafter, furthergaming checking takes place in step 430, and, in step 490, further logicadjustments take place. Each of these will now be described in moredetail.

The episode payment group encoding step 402 is, in general terms,providing an additional level of detail to conventional claims data. Inparticular, as illustrated in FIG. 3A-2, claims data that has beengrouped will contain what has been described above and is known as anETG instance classification. An ETG instance classification classifiesthat claim as one of approximately 580 specific types of ETGs. While theepisode treatment groups as conventionally used have functionalitywithin the context that they were originally created, they are differentthan EPG in a number ways. The primary differences being that certainETG groups are more properly grouped as a single EPG, and certain ETGclassifications are more properly grouped into a number of different EPGclassifications.

It is nonetheless possible, though not preferred, to use the ETGclassifications and not translate them to the EPG category discussedhereinafter and still obtain certain of the advantages of the presentinvention. As a result, it should be apparent that EPGs are a logicalconstruction that represent normative and actual aggregations of medicalclaims into a single unit that is both clinically and financiallyrelevant. The emphasis is on the payment, seeking to determine acategorization of the payments for the actual treatment in comparisonwith a norm for the actual condition.

The translation to an EPG, whether made from an ETG or using some othermanner of grouping, should, however, aggregate conditions that aresimilar in both fact and appearance, because the EPG measure seeks to becomparative against a clinical/financial norm.

As an example, whereas there is only a single ETG for osteoporosis, itmay be determined that there should be multiple EPGs since, in thepresence of different comorbidities, the average treatment cost could bevery different.

As another example, though there are two different ETGs for a fungalskin infection, one for a condition that requires surgery and anotherfor a condition that does not require surgery, it would typically bedetermined that there should be only a single EPG. This is because theETG for the infection with surgery assumes that surgery was needed, butunder the constructs of the present invention that is an assumption thatwould be avoided. Though the ETG categorization indicates that thesurgery occurred, it cannot provide any insight into whether the surgerywas necessary or could have been avoided. Thus, having a single EPG,which could then be adjusted for comorbidities that will then indicatethat circumstances warranted the usage of surgery.

And an example of a single ETG that maps to more than one EPG are claimsfrom a patient for both birth control pills and seratonin basedmedication that could both map to the ETG category for a routine exam.Since, however, the birth control pills are more properly associatedwith a wellness and maintenance episode relating to reproductive health,and the seratonin based medication is more properly associated with awellness and maintenance episode relating to psychiatric health,separate EPGs for these different wellness and maintenance episodeswould exist.

Accordingly, with the above description in mind, FIG. 8A-2 illustratesthat, for each open and newly-closed ETG instance (“instance” is alsoused to refer to episode of care) in step 404, step 406 follows and adetermination is made whether there is a EPG category for the ETGcategory so that a direct translation can be made. If there is, step 408follows and, for each claim associated with that instance, the EPGcategory is then associated with it. Thereafter, in step 410, a decisionis made as to whether there is another open, or newly-closed ETGinstance that needs to be operated upon and, if so, that is done. Ifnot, then the episode payment group and coding process is completed.

However, if, in step 406, a determination is made that there is not adirect translation for the ETG category to a EPG category, for eachinstance, then a number of EPG category assignment business rules areused to determine the correct translation. This is illustrated in step414 that identifies the existence of these EPG category assignmentbusiness rules and, in step 416, operates upon the claims data, usingthe business rule to determine if a EPG category can be found. Thesebusiness rules are obtained based upon logic associated with the varioustypes of episodes such as provided in the above-mentioned examples wherea direct translation from an ETG to a EPG category did not occur. Step418 determines whether this EPG category was found and, if it was, thenstep 408 follows with the steps, as described thereafter, followingthereon, using that EPG code. If the business rule was not sufficient toestablish the EPG category, step 420 determines if another business ruleexists that would potentially allow the categorization of the ETGcategory into a EPG category. If it does, then that business rule isidentified in step 414 and the steps previously recited follow. If not,step 422 follows and this particular claim is flagged so that the ETGinstance can be reviewed manually, and a determination of the EPGcategory made. Once this manual review is completed for each of theclaims, there will then be a EPG category associated with each of theinstances. It is noted, of course, that open data 100 that had beenpreviously operated upon may contain a EPG category and, to the extentthat certain instances already contain such a category, those instancesneed not be operated upon again, although new claims associated withthat instance can be so categorized.

Following the episode payment group encoding, a further post-processinggaming check step takes place, as identified in FIG. 8A-1, as step 430.Step 430 can contain various further gaming checks, four of which areidentified in FIG. 8A-3. These four various gaming checks are checkingfor serial episodes (430A), checking for costs that are too low,referred to as floor analysis (430B), checking for diagnosis upcoding(430C), and checking for the need to prorata partial episodes (430D).Each of these will now be discussed. It should be noted, however, that,while all of the various gaming checks described herein are preferablyimplemented, that all, none or some of them can be implemented, as wellas others. Furthermore the order in which they are performed is notsignificant to the implementation of the present invention.

In the check for serial episodes (step 430A), step 432 begins theprocess in which each EPG instance is operated upon and step 434 makes aquery as to whether the same patient had an earlier instance of thesame, or similar, EPG category. Similar EPGs are determined in aninstance table within the incentive administrator database 40 thatassociates EPG categories that are related. Thus, if there were anearlier instance of a related EPG category, step 436 follows and adetermination is made if this were a chronic condition. If it is achronic condition, and would thus require repetitive visits to theprovider 20, step 438 follows and it is determined whether there isanother instance to check and, if not, then the analysis of step 430Bcontinues. If there is another instance to check, the steps, aspreviously described and further subsequently described hereinafter,take place.

If, in step 434, it is determined that there was not an earlier instanceof the same or similar EPG category, then step 438 also follows sincethere is not the possibility of there being a serial occurrence of thesekind of events.

If, however, in step 436, it was determined that the condition is notchronic, step 440 follows and prior episodes of the EPG categories arereviewed, and the most recent instance is selected. Thereafter, in step442, a determination is made regarding the number of days between thestart date for this particular EPG category instance (referred to as the“main” episode), and the prior episode's end date. If the number of daysbetween episodes is less than a predetermined number of days that is notsuspicious for this EPG category, then this main episode is flagged instep 444 for subsequent review. This is because this determinationsignifies that the claims now associated with this main episode may, infact, have been part of a previous episode of care. If such were thecase, then credit should not be given to the provider 20 for a secondepisode of care but, rather, the claims now attributed to the mainepisode should be attributed with the previous episode of care havingthe same EPG category. Accordingly, flagged main events will not be usedin the determination of an incentive payment based upon a new episode ofcare.

If, however, in step 442, the number of days determined is greater thanthe number of days between the episodes which is not suspicious value,then step 438 follows and the steps as described hereinafter ensue.Accordingly, this completes the check for serial episodes.

Following is the floor analysis determination step 430B. This beginswith step 446 for each newly-closed EPG instance and the determinationin step 448 as to whether the “override floor baseline” indicator hasbeen set for this EPG instance. Each EPG category has a minimum valuepreviously established. To override this minimum value, the overridefloor baseline indicator is set to signify that it has been previouslydetermined that, although the amount for this EPG instance is below abaseline floor minimum value for the category, that that is acceptablebecause it has been previously been investigated. If, however, theoverride floor baseline indicator has not been set, step 450 follows anda determination is made whether the adjusted baseline for thisnewly-closed EPG instance is below the floor-base line value for thisEPG instance. If it is then, in step 452, this episode of care is markedas being below the floor baseline so that it can be further investigatedthereafter. If, however, in step 450, the adjusted baseline is not belowthe floor baseline value, then the record is not so-marked. In eitherevent, step 454 follows, and a determination is made as to whether thereis another newly-closed EPG instance to operate upon. If so, that isdone using the methodology previously discussed. If not, then thediagnosis upcoding step 430C follows.

Diagnosis upcoding step 430C checks for the existence of diagnoses thatare more severe than the actual condition that the patient has.Diagnoses of this type can, as explained previously, allow the provider20 to receive greater compensation than the provider is entitled to.Accordingly, to check for diagnosis upcoding, for each newly-closed EPGinstance, as shown in step 456, there is initially a check in step 458to determine whether an override diagnosis upcoded check indicator hasbeen set for this EPG instance. If the override indicator has been set,similar to the override indicator in the floor analysis discussedpreviously, step 460 follows and it is determined whether there isanother newly-closed EPG instance to operate upon. If, however, in step458, the override diagnosis indicator has not been set, step 462 followsand, for that EPG category, the associated upcoding diagnosis checktests are then run. The first such test is ran, as illustrated in step464, by the execution of the related test, which follows in step 466with the determination of whether a result set was found. If a resultset was found, the episode is marked as a possible diagnosis upcode instep 468. Thereafter, step 470 follows to determine if there is anothertest for this category. If there is, then that test is input and step464 is repeated and the steps, as described, follow thereafter. Once allof the tests have been completed, it can be determined whether there isa possible diagnosis upcode for this EPG instance.

The upcode diagnosis check tests in step 462 for each EPG category againuse the A1 Rule Engine that has been previously discussed. Any number ofsuch rules can be made to determine whether there is the possibility ofupcoding. For example, if a patient comes to a provider 20 with a commoncold, which is diagnosed as pneumonia, the totality of claims data ischecked for that episode of care to determine whether drugscharacteristic to the treatment of pneumonia were, in fact,administered. If they were not, then the fact that none of these drugswere prescribed can be used to create one of the upcode diagnosis checktests for instances of this particular EPG category.

After the diagnosis upcoding takes place from step 430C, then theprorata of partial episode step 430D takes place. In this step, it isgenerally being determined whether the patient submitting the claim isstill part of the plan that is associated with the payer 30. A personmay voluntarily leave a plan to go join another plan from a differentpayer or, alternatively, may have passed away. Accordingly, for partialepisodes, a factor is needed to determine a partial incentive payment.

As shown in FIG. 8A3 relating to step 430D, step 472 begins bydetermining whether the payer has provided a list of members who haveexited the plan. If no such list exists, then this step cannot beperformed and it is skipped. If such a list has been made, step 476follows and, for each patient who has exited the plan before a claimscutoff date used in the processing, a determination is made, as shown instep 478, of whether the patient has any open episodes. If there are noopen episodes, a determination is then made in step 480 as to whetherthere is another patient who has exited the plan for the claim cutoffdate used in the last processing. If so, then the steps described bothpreviously and subsequently with respect to determining a proratapartial episode factor are made. If, however, in step 478, the patientdoes have an open episode, for each open episode, as illustrated in step482, step 484 determines the average length of the episode with the sameEPG category in the files of closed episodes, and then, in step 486,determines the factor to use based upon the information previouslyobtained. Step 486 entails calculating the proposed baseline overridevalue for the open episode to the adjusted baseline, multiplied by theratio of the actual length of the open episode, which is multiplied bythe mean calculated in step 484. As a result, a factor (or proratapercentage) for the partial episode is determined that can be used inthe subsequent calculation of determining an incentive payment for thephysician or provider.

After step 486, step 488 follows to determine whether there is anotherepisode open for this patient. If so, steps 482 through 486 are repeatedand, if not, step 480 follows and is implemented as has been described.Accordingly, the post-processing game checking of step 430 is, thus,complete.

Accordingly, post-processing logic adjustments of step 490 then takeplace. These are described in more detail in FIG. 8A-4. Post-processinglogic adjustments, similar to the preprocessing logic adjustmentsdescribed, contain a set of all the post-processing business rules, asindicated in step 492. For each business rule, the EPG instance isoperated upon in step 494 and step 496 determines whether the AI RulesEngine test found data that required modification. If so, that data ismodified in step 497 with step 498 following thereafter and, if not,step 498 follows directly. In step 498, it is determined whether thereis another business rule and, if so, that business rule is operated uponin a subsequent repetition of step 494 and steps following thereafter.If not, then the post-processing logic adjustments are completed.

An example of a post-processing logic adjustment is the existence of achronic condition in which the patient has not seen the provider 20 forperiod of time that exceeds the predetermined window, thus causing thegrouper in step 300 to close the episode, as has been previouslydescribed. If, however, the chronic condition is one that requires thecontinued refilling of a prescription, such as an inhaler for anasthmatic, then the post-processing logic adjustment can have a rulethat looks for closed cases of asthmatics and artificially keeps themopen so that the claim for the prescription can be processed.

After the post-processing logic adjustments, the step of determining theresponsible physician can be made. As noted above, the determination ofa responsible physician, illustrated in FIG. 5 at step 500, can takeplace earlier in the process, in fact at any time after a EPG instancehas been identified. However, for sake of convenience, it is discussedat this point. Prior to discussing in detail the automated steps thatthe present invention uses to determine a responsible physician, it isnoted that this process is needed in order to determine the specificphysician who will receive any incentive provided according to thepresent invention. This is significant since, while in an episode ofcare, a patient may see any number of different physicians or providers,there is typically a single physician or provider who causes theinvolvement of other physicians or providers and is thus mostresponsible for the overall cost associated with the episode of care.Accordingly, by determining which physician or provider is the oneprimarily responsible for the other physicians and providers actions,the present invention specifically attributes an incentive award to thatphysician who is responsible for making those decisions. Accordingly,this method of determining a responsible physician was useful bothwithin the context of the present invention as well as in other contextswhere it is helpful to know whom the responsible physician should be.

As illustrated in FIG. 9A-1, for each open or newly-closed EPG instance,as illustrated by step 502, step 504 determines whether the episodeinstances as a “defining procedure.” Examples of defining procedures aremajor surgeries or, in the context or pregnancy, a delivery. If, for theepisode instance, there is a defining procedure, then the physician whoperformed the procedure is defined as the episode owner in step 506. Theepisode owner is likely to be the responsible physician, but, in step508, a subsequent check is made to determine whether the EPG instancecontains a “termination procedure.”

For most procedures, the provider who performed the defining procedurewill be the same person who performed the termination procedure, butthis may not always be the case. For example, in a bone marrowtransplant, the harvesting of the marrow may be the defining procedure,but the restoration of the bone marrow might be the terminatingprocedure. If these were done by different physicians, that may beevidence that the responsible physician has changed during the course oftreatment. Thus, in step 508, if there is a termination procedureinvolved, in step 510 a determination is made as to whether thephysician who performed the defining procedure is the same as the onewho performed the termination procedure. If not, step 511 is performedand the new provider is also noted on the EPG record so that theincentives payments can be split in some manner between the provider whoperformed the initial defining procedure, and the subsequent definingprocedure. If, however, they are the same, then step 512 follows and adetermination is made as to whether there is another newly-closed, oropen, EPG instance that needs to be operated upon in a manner that usesthe steps as described both previously and subsequently.

Embodiments may include a mechanism for accounting for attribution andreferrals. In general, the responsible physician is selected based uponsomething he or she did in the patient's treatment. A particularlyvaluable service is for the primary care doctor to make a proper andtimely referral. The specialist is usually designated to be the “owner”of the episode through a process commonly known as attribution. In anembodiment, a particular type of episode of care can be attributed to areferring primary care doctor to thereby provide the referring physicianwith an incentive to refer appropriate patients promptly and to thecorrect specialist. This type of method is referred to as “enhancedattribution.” For example, referral of a patient with abdominal pain toa surgeon with the diagnosis of possible appendicitis would result inthe surgeon “owning” the episode, i.e., the episode would be attributedto the surgeon, not the referring physician. However, attributing anadditional *appendicitis episode* to the referring physician wouldincentivize him/her to be as proactive as possible in making the initialdiagnosis and the referral, thus improving outcomes and reducing costs.

Previously, with reference to FIG. 9A-1, there has been described how todetermine the responsible physician if there was a defining procedure,as was initiated by the determination made in step 504. If, howeverthere is not a defining procedure, step 516 follows and thedetermination is made as to whether this EPG category is of the typethat does not allow the automatic assignment of an episode owner. Ifthis EPG category is of that type step 518 follows and the EPG instanceis marked for manual review. An example of such a EPG category that doesnot presently allow for automatic assignment is a category in which anumber of physicians, and not just a single physician, are typicallyinvolved. A specific example of this would be a cancer patient who willhave many different physicians involved in determining how to proceedwith the case.

If, however, in step 516, it is determined that this EPG category is notof a type that prevents auto assignment, then step 520 follows in whichit is determined whether a single physician is the cause of more than85% of the physician costs for the EPG instance. By physician costs isloosely meant costs incurred as a result of the physician or his stafftreating the patient, in contrast to another facility treating thepatient or lab tests by another entity being performed. If a singlephysician is responsible for more than 85% of those costs, thatphysician is made episode owner in step 506 and then step 528 follows todetermine whether this physician was the physician who made the initialdiagnosis. If the answer is yes, then the step 508 follows. If theepisode owner was not the physician who made the initial diagnosis, step530 follows and a referral is created for the physician who did make theinitial diagnosis. This referral is used for purposes of providingincentives to referring physicians, as will be discussed hereinafter. Inany event, if a referral for referring physician is created in step 530,step 508 still follows and it and the following steps are executed asdescribed above.

If, however, in step 520, it is determined that there is not a singlephysician who is responsible for incurring more than 85% of thephysician costs for the EPG instance, step 522 follows. A determinationis made in step 522 as to whether there is a single physician whorepresented more than 50% of the physician costs and was either thephysician who made the initial diagnosis or was the first specialist tobill the patient after diagnosis by a general practitioner. If theanswer to the query in step 522 is yes, then that physician is assignedas the episode owner in step 524, and step 508 follows. If, however, aphysician still cannot be identified as a result of the test in step522, then that EPG instance is marked in step 518 for manual review. Itis noted that if the Symmetry grouper is used, that the physician costscan be derived from claims that are designated as being of themanagement record type M, as discussed previously in the discussion ofthe grouper.

Accordingly, a substantial number of the EPG instances can beautomatically identified without requiring any manual review. Even whena “manual review” is deemed necessary, a portion of that review can alsobe automated. As illustrated in FIG. 9A-2, a typical provider can be thedefault physician of the patient. Accordingly, FIG. 9A-2 illustrates amethod for determining a default physician. This begins with adetermination in step 540 of whether the patient already has a fixeddefault physician. If the answer is yes then that physician can beassigned as the default physician for this EPG instance. This defaultassignment can be manually reviewed if desired but, if not, that personcan also be determined to be the responsible physician. If there was notpreviously a fixed default physician, then step 544 follows and it isdetermined whether the patient has one or more open episodes. If thereare, step 546 follows and the physician who is assigned to the mostcommon episodes for this patient is identified as the episode owner forthis instance. If, in step 544, there are not one or more open episodes,step 548 follows and a determination is made as to whether there are oneor more closed episodes. If the answer to that is yes, then, as in step546, the most common episode owner of these closed episodes is assignedas the default physician for this particular episode. If, however, instep 548, there is not one or more closed episodes, step 552 follows anda query is made as to whether the patient has any physician cost claims,which, as described above, correspond to the management type recordclaims in the Symmetry grouper. If the answer to that is yes, thephysician who has the largest amount of such claims costs is assigned tobe the default physician for this particular episode instance. If not,then this episode is again flagged for manual review and can be assignedafter manual review.

Returning again to FIG. 5, after the step 500 just discussed in detail,there follows step 610 that tests for closed instances, as previouslydescribed, and each closed instance is then operated upon, as summarizedabove in the discussion of FIG. 5. Certain of the details of thosesteps, as implemented in the preferred embodiment of the invention, willnow be described.

Initially, the step 650 that tests for outliers, or extremes will bediscussed. As mentioned above, the testing of outliers is performed inorder to remove episodes of care that are extremes, and particularlyextremes that result in costs that are much greater than the baselinedeterminations. Since the baseline values for different EPGs are basedupon norms for that type of procedure, incentives are fairly calculatedbased upon procedures that have some similarity to the norms. And, whilethere will always be exceptions, for example due to a patient developingcomplications that are unforeseen, it would be unfair to penalize aphysician for the extra costs incurred as a result of the complicationsand it would also be unfair to provide incentives based upon the extracosts incurred as a result of those complications.

Accordingly, in testing for outliers, as shown in FIG. 10, step 652 actsupon each newly closed EPG instance, and queries in step 654 whether ado not check for outlier indicator has been previously set. Thisindicator will typically have been manually set, although the indicatorcan automatically be set for certain types of EPG categories. If theindicator is set, then step 656 follows and a determination is madewhether there is another EPG instance that needs to be checked. If so,then steps as described above and hereinafter follow for that nextinstance, and if not then the outlier determination is complete.

If, however, in step 654 the indicator is not set, then step 658 followsand for that instance the total cost for the episode of care is comparedagainst a predetermined maximum cost value associated with that type ofEPG instance. If the total cost is not greater than the maximum, thenstep 656 as described above follows. If the total cost greater than themaximum, then step 660 follows and the outlier indicator is set. Withthe outlier indicator set, that allows for either a manual review of theepisode, or, alternatively, the automatic treatment of the episode suchthat the incentive, if any, will be based on the predetermined maximumcost value rather than the actual cost. Other uses of this indicator arealso possible.

After the outliers test 650 is complete, then the comorbidity adjustment680 preferably takes place, in which, as described above, effects of oneillness that can exacerbate or make easier the treatment of anotherillness are taken into account for purposes of altering the baseline forthat EPG category, as well as altering the incentive factor. Thus, asshown in FIG. 11, each newly closed EPG instance is operated upon,although it is noted that open instances can also be operated upon if itis desired to provide an estimate of the baseline value adjusted forcomorbidity to the responsible physician or provider.

Step 682 of FIG. 11 is used to show each closed and open instance, whichis then operated upon in step 684 to correlate open and closed instancesfor each patient, such that each correlation can be operated upon instep 686. In step 686 it is determined whether this combination ofinstances has an entry in a comorbidity definition table. If it does,then the baseline value of the EPG instance is adjusted to reflect thecomorbidity factor. Thus, for instance, if a person is being treated forboth asthma and bronchitis, which are two distinct episodes of care, thefact that there is an overlap of treatment for both may cause thebaseline value for each to be only 70% of the typical baseline if onlyone of those episodes existed without the other. Further, for instance,if a pregnant woman is also being treated for hypertension, then thefact that this complicates the treatment of both could cause thebaseline value for the pregnancy to be 170% as compared to a normalpregnancy, and the baseline value for the hypertension to be 140% ascompared to a typical episode of hypertension.

If the pair of instances tested in step 686 do not have an entry in thecomorbidity table, or if there is an instance which has thus beenresolved in step 688, then step 690 follows and it is determined whetherfor that patient there is another pair of episodes that should beoperated upon. If so, then step 684 and subsequent steps follow for thatnext pair of instances, and if not then step 692 follows and it isdetermined if there are any newly closed instances for another patientthat need to be operated upon. If there is, then step 682 and subsequentsteps as described above follow, but if there is not then thecomorbidity determination is finished.

In an embodiment, the comorbidity determination process is configuredaccount for the diagnosis and treatment of particularly complex cases.In general, it is often difficult to get doctors to voluntarily takeresponsibility for certain complicated or difficult cases. To alleviatethis problem, the incentive payment process provides an incentivecompensation to providers who take care of such patients. For example,it is typically much easier to perform abdominal surgery on a healthythin patient than an unhealthy obese one. Under present systems,however, surgery fees are the same for both because they are determinedby the “CPT” codes filed by the physicians' offices. In an embodiment,an additional incentive payment is paid to physicians for taking care ofthese more complex cases. The incentive system can be configured todefine a threshold complexity level for particular episodes ortreatments, and one or more levels of enhanced complexity. Any treatmentinvolving these enhanced complexity levels can trigger the calculationof an additional incentive payment or proportion of payment.

After the comorbidity determination, the calculate savings step 700takes place, with the preferred manner of calculating savings being nowfurther described with reference to FIG. 12. As illustrated, in step 702each newly closed EPG instance, with the information obtained in thepreviously described steps, is operated upon. In step 704, adetermination is made whether a do not pay incentive indicator is set.This can be set in many different manners. For instance, this indicatorcould be set if the serial episode gaming indicator or the possibleupcode gaming indicator were set as described in previous steps. This“do not pay” incentive indicator could also be set based upon otherconsiderations. If set, however, then a savings field associated withthe episode is set to null, thereby indicating that there was no savingsand thus no incentive should be paid, and step 208 follows to determineif there is another episode that needs to be operated upon, followed byeither that operation as being described or the completion of theincentive payment calculation.

If, however, in step 704 the do not pay indicator is not set, then step710 follows and all of the claims for the episode are totaled to obtainan total cost for this episode of care. With the total cost beingdetermined, then step 712 follows to determine if an adjusted baselineamount exists. If it does not, then step 714 follows and a savings isdetermined by subtracting from the total cost the normal baseline valuefor that EPG type of episode of care. If the savings value is positive,then a savings has been realized and that value is used for incentivedetermination purposes as described hereinafter, whereas if the savingsvalue is negative, then there has not been any savings realized.

It should be noted that the system can be implemented such that anegative savings value results in a net negative incentive for thatepisode of care, or can be implemented such that a negative savingsvalue results in the savings value for that episode being reported aszero for that episode of care. The latter implementation has theadvantage of reducing a provider's potential anxiety about implementingthe system of the present invention in the first instance, since thereis much less probability of there being a down-side to the program ifthere does not exist a net negative incentive for any episode of care.The latter implementation also distorts reality, however, in thatincentive can get paid to providers who overall are inefficient.Accordingly, the savings value can be used in a variety of ways tobalance the effect of the extremes mentioned above.

Regardless of the specific implementation, after the savings value isdetermined for a normal EPG baseline, then step 708 follows as describedpreviously. If, however, an adjusted baseline exists, then this isdetermined in step 712 and operated upon in step 716, using the adjustedbaseline value, but otherwise as described above. This adjusted baselinevalue can be adjusted for comorbidity, or a partial episode, aspreviously described.

Once the step 700 calculate savings step is complete, then the step 750payment of incentives takes place, as illustrated in FIG. 5 and shown infurther detail in FIG. 13. On some preferably periodic basis, as shownin step 752, for each responsible physician, incentive payments based onthe accumulated savings for that period are determined. Step 754 sets anincentive payment owed field associated with each responsiblephysician/provider 20 to zero, and similarly in step 756 the incentivepayment owed to the incentive administrator 40 is set to zero.Thereafter, in step 758, each closed EPG instance is operated upon, andin step 760, a determination is made whether the outlier indicator hasbeen set for that instance. If it has, that indicates that theparticular instance being operated upon will not be used for purposes ofincentives calculations and thus in step 762 an incentive indicator paidfield is set to indicate that the incentive has been determined—to bezero, but nonetheless determined. Step 764 follow and a determination ismade whether there is another EPG instance corresponding to a closedepisode that needs to be operated upon. If not, then the incentivepayment calculations are finished, and if so, then another EPG instanceis operated upon, as described above and hereinafter.

If, however, in step 760 the outlier indicator was not set, then forthat instance step 766 follows and a determination is made whether thereferral indicator, described above, that is associated with thisinstance, had been set. If not, then a referral portion of the savingsmust be attributed to the referring physician, and if not, then thesavings for the instance can be divided between only the responsibleprovider 20, the payer 30, and the incentive administrator 40. With noreferral, the preferred percentage is split equally in thirds, asdiscussed above, and with a referral, a small percentage is provided tothe referring physician, with the remainder split in thirds.

If the referral indicator was set, then step 768 follows and adetermination is made of the referral amount for the referringphysician/provider based upon the referral amount factor that is beingused multiplied by the savings previously determined from FIG. 12 forthat instance. This amount is added to the payment owed for thatreferring physician/provider.

Thereafter follows step 770, which determined the amount owed to theresponsible physician/provider 20. This will preferably follow step 766if there was no referring physician, and will follow the step 768determination if there was. In step 770, the physician/providers 20incentive is determined by multiplying the savings previously determinedfrom FIG. 12 with the responsible physician/provider factor. Thisincentive is preferably one-third of the total savings if there was noreferral and without any portion being attributed to the physiciancoordinator, and will be somewhat less if there was a referral or anamount attributed to the physician coordinator. The amount determined asthe incentive amount for this instance is then added to the payment owedfield for the responsible physician/provider 20. Thereafter, in step772, that percentage, if any, that this attributable to the physiciancoordinator is determined and the incentive amount for this instance isthen added to the payment owed field for that physician coordinator.Similarly, in step 774 which follows, for that instance, the incentiveadministrators 40 incentive is determined by multiplying the savingspreviously determined from FIG. 12 with the incentive administratorfactor, which is preferably one-third the savings if there was noreferral, and will be somewhat less if there was a referral, asdescribed above. The amount determined as the incentive amount for thisinstance is then added to the payment owed field for the incentiveadministrator 40. The incentive payments may be further modified bycertain factors, such as patient satisfaction surveys, and other similarmechanisms.

Thereafter, with the incentives determined for that instance, theincentive paid indicator is set in step 762 and each instance isoperated upon as described above.

Step 774 follows, and for each physician it is then determined in step776 whether that physician should receive an incentive award for thatperiod. If so, then step 779 follows and a payment request is made forthat physician. Step 780 queries whether payment requests for anotherphysician are needed so that the previous steps 776 and 778 can berepeated for each. If not, then step 782 follows and a payment requestfor the incentive administrator 40 is also made. Thus, the determinedpayment owed to each different responsible physician/provider 20 and theincentive administrator, related to the various completed episodes thattook place during the period being operated upon, can be provided to thepayer 20 so that payment can be made. It should be noted thatdetermination of the payment owed to the responsible physician/providers20 and the incentive administrator 40 implicitly determines the savingsretained by the payer 30.

In general, the provider may be any independent healthcare provider,such as a individual doctor running a solo practice or an independentcontractor. The provider may also be a physician or professional who ispart of a larger organization, such as a hospital, medical care group,or other organization. In an embodiment, the provider may be part of anintegrated medical service organization, or an ACO (accountable careorganization). Under the current model, an ACO represents a model inwhich physicians implicitly allow their role as receiver of the directincentive for lower cost care to be subsumed into the largerorganization (the ACO). The ACO, in turn compensates the physician forthe role he or she plays in efficient patient management according toprivate negotiations. Under this model, the ACO, or similar organizationrepresents a superset of subscribing physicians, and incentive paymentsthrough the method described herein, would be processed through thislarger organization to the individual physicians. The incentive payment3 paid to provider 20 (as shown in FIG. 1), would thus be paid inaddition to any incentive payment provided by the ACO itself. That is,the incentive payment by the incentive administrator can be combinedwith the incentive payment by the ACO (or other managed careorganization) in a defined manner, such as through replacement,supplement, or other Alternatively, it may be used to supplement orsupplant any or all of any such incentive provided by the ACO. Similarmodels including “Value-based Purchasing,” “Shared Savings,” and“Bundled Payments,” are becoming part of the healthcare landscape andlexicon. In each of these cases, the physician either participates byclaiming an incentive based on the incentive administrator process 40,or he explicitly or implicitly allows his role to be subsumed into theACO or “Integrated Health System. In one implementation, the incentiveadministrator may be subsumed into the ACO structure and is implicit inthe contractual payment arrangements between the ACO and individualphysicians working within it.

In an embodiment, certain incentive administration functions can beincorporated as part of the function of either or both of the payer orprovider. In such as case, the payer or provider could at leastpartially be an incentive administrator, such as by using the incentiveadministrator process under a license from an incentive administratorplatform or service provider.

In accordance with the method described above, the savings determined bythe incentive administrator is split in some manner among threeindependent entities: the responsible provider (i.e., the physician),the payer (i.e., CMS, a state Medicaid program, BCBS(Bluecross/Blueshield), another insurance company, self-insuredemployer, etc.), and the incentive administrator. In certain cases oneor more other entities or parties may also be included as eligible for aportion of the savings, inasmuch as they may offer de facto assistanceto one of these three entities in consummating an improved care planthat objectively reduces overall costs and improves quality. Forexample, a hospital could share a portion of savings allocated to theprovider if it was assisting the doctor with data feeds, nursingprompts, etc. In this example, the third party is the doctor/hospital,with the payment bifurcated between the doctor and the hospital.

Aspects of the one or more embodiments described herein may beimplemented on one or more computers executing software instructions.The computers may be networked in a client-server arrangement or similardistributed computer network. Under such a system, a network servercomputer for any of the entities of payer 30, provider 20 or incentiveadministrator 40 may is coupled, directly or indirectly, to one or morenetwork client computers operated by any of the other entities through anetwork. The network interface between server computer and clientcomputers may include one or more routers that serve to buffer and routethe data transmitted between the server and client computers. Thenetwork may be the Internet, a Wide Area Network (WAN), a Local AreaNetwork (LAN), or any combination thereof. The computers may be embodiedin any appropriate computing device, including, but not limited toserver class computers, workstations, personal computers,laptop/notebook/netbook computers, personal digital assistants (PDAs),or other processor-based devices, such as smartphones, tablet computers,and the like. The network may include interfaces for access to anynumber of appropriate third party services and information providers,such as for practice guidelines and “best practice” information.

Aspects of the process and system described herein may be implemented asfunctionality programmed into any of a variety of circuitry, includingprogrammable logic devices (“PLDs”), such as field programmable gatearrays (“FPGAs”), programmable array logic (“PAL”) devices, electricallyprogrammable logic and memory devices and standard cell-based devices,as well as application specific integrated circuits.

It should also be noted that the various functions disclosed herein maybe described using any number of combinations of hardware, firmware,and/or as data and/or instructions embodied in various machine-readableor computer-readable media, in terms of their behavioral, registertransfer, logic component, and/or other characteristics.Computer-readable media in which such formatted data and/or instructionsmay be embodied include, but are not limited to, non-volatile storagemedia in various forms (e.g., optical, magnetic or semiconductor storagemedia).

Unless the context clearly requires otherwise, throughout thedescription and the claims, the words “comprise,” “comprising,” and thelike are to be construed in an inclusive sense as opposed to anexclusive or exhaustive sense; that is to say, in a sense of “including,but not limited to.” Words using the singular or plural number alsoinclude the plural or singular number respectively. Additionally, thewords “herein,” “hereunder,” “above,” “below,” and words of similarimport refer to this application as a whole and not to any particularportions of this application. When the word “or” is used in reference toa list of two or more items, that word covers all of the followinginterpretations of the word: any of the items in the list, all of theitems in the list and any combination of the items in the list.

The above description of illustrated embodiments is not intended to beexhaustive or to limit the embodiments to the precise form orinstructions disclosed. While specific embodiments and examples aredescribed herein for illustrative purposes, various equivalentmodifications are possible within the scope of the describedembodiments, as those skilled in the relevant art will recognize. Theelements and acts of the various embodiments described above can becombined to provide further embodiments.

1. A computer-implemented method of providing an apportioned monetaryincentive for treatment of a medical patient, comprising: creating abaseline value related to the treatment; receiving from a payer, adiagnosis of the patient performed by a healthcare provider and providedto the payer, along with an associated cost quantified by the baselinevalue; creating an episode of care based upon the diagnosis of thehealthcare provider and the treatment; summing all claims processedduring the episode of care to obtain a total treatment cost;determining, in a processor-based computer, if the total treatment costis less than the baseline value, thus resulting in a cost savings forthe decided course of treatment; correlating an original code and afinal code for the episode of care with a time interval between a firstvisit with the healthcare provider and a final treatment; representingthe cost savings as an incentive payment that is to be apportioned amongthe responsible provider, the payer and the incentive administrator,wherein the incentive payment includes a portion based on the timeinterval; causing a first portion of the cost savings to be sent to theresponsible provider in the form of a monetary incentive that isindividually calculated based on the episode of care, and correlated tothe total treatment cost; causing a second portion of the cost savingsto be sent to the payer, the second portion constituting a savings inthe amount paid out for the course of treatment; and causing a thirdportion of the cost savings to be retained by the incentiveadministrator, wherein at least two of the responsible provider, thepayer, and the incentive administrator are independent parties.
 2. Themethod of claim 1 further comprising: verifying that the episode of careis not an outlier case representing an extreme condition that costssignificantly more than the cost associated with the initial baselinevalue; and adjusting the initial baseline value by factoring in anyeffects due to comorbidity to derive an adjusted baseline value.
 3. Themethod of claim 1 further comprising identifying a responsible providerwho performs a defining procedure from among a plurality of healthcareproviders involved in the treatment, wherein the responsible provider isa member of a medical provider group with whom a portion of the firstportion of the cost savings to be sent to the responsible provider isshared.
 4. The method of claim 3 wherein the medical provider group isone of a Health Maintenance Organization, an Accountable CareOrganization, and an integrated medical services group, and wherein thepayer comprises one of an insurance company, a governmental entity, or agovernment agent.
 5. The method of claim 3 wherein the medical providergroup provides a separate incentive payment for efficient treatmentleading to a decrease in the total treatment cost, and wherein theincentive payment is combined with the separate incentive payment plan.6. The method of claim 5 further comprising: identifying a best practiceprocedure for the episode of care; determining whether the treatmentcorresponds with the identified best practice procedure; and modifyingthe incentive payment if based on correspondence of the treatment withthe best practice procedure.
 7. The method of claim 6 wherein the bestpractice procedure is defined by one of an established medicalorganization, a national medical organization, or an academic medicalcenter.
 8. The method of claim 1 wherein a shorter time intervalcompared to a baseline time interval for diagnosis and delivery of carefor the episode of care causes an increase in the first portion of thecost savings to the responsible provider.
 9. A computer-implementedmethod of providing an apportioned monetary incentive for treatment of amedical patient, comprising: identifying a responsible provider whoperforms a defining procedure from among a plurality of healthcareproviders involved in the treatment, wherein the responsible provider isa member of a medical provider group with whom a portion of the firstportion of the cost savings to be sent to the responsible provider isshared, and wherein the medical provider group provides a separateincentive payment for efficient treatment in the episode of care;creating a baseline value related to the treatment; receiving from apayer, a diagnosis of the patient performed by a healthcare provider andprovided to the payer, along with an associated cost quantified by thebaseline value; creating an episode of care based upon the diagnosis ofthe healthcare provider and the treatment; summing all claims processedduring the episode of care to obtain a total treatment cost;determining, in a processor-based computer, if the total treatment costis less than the baseline value, thus resulting in a cost savings forthe decided course of treatment; representing the cost savings as anincentive payment that is to be apportioned among the responsibleprovider, the payer and the incentive administrator, wherein theincentive payment is combined with the separate incentive payment;causing a first portion of the cost savings to be sent to theresponsible provider in the form of a monetary incentive that isindividually calculated based on the episode of care, and correlated tothe total treatment cost; causing a second portion of the cost savingsto be sent to the payer, the second portion constituting a savings inthe amount paid out for the course of treatment; and causing a thirdportion of the cost savings to be retained by the incentiveadministrator.
 10. The method of claim 9 wherein at least two of theresponsible provider, the payer, and the incentive administrator areindependent parties.
 11. The method of claim 10 wherein the medicalprovider group is one of a Health Maintenance Organization, anAccountable Care Organization, and an integrated medical services group,and wherein the payer comprises one of an insurance company, agovernmental entity, or a government agent.
 12. The method of claim 9further comprising: verifying that the episode of care is not an outliercase representing an extreme condition that costs significantly morethan the cost associated with the initial baseline value; and adjustingthe initial baseline value by factoring in any effects due tocomorbidity to derive an adjusted baseline value.
 13. An apparatus fordetermining an amount of an apportioned monetary incentive, asdetermined by an incentive administrator and payable to a physicianresponsible for a course of treatment of a patient with a conditionduring an episode of care comprising: a first computer system operatedby the incentive administrator, including: means for creating a baselinevalue related to the treatment; means for receiving from a payer, adiagnosis of the patient performed by a healthcare provider and providedto the payer, along with an associated cost quantified by the baselinevalue; means for creating an episode of care based upon the diagnosis ofthe healthcare provider and the treatment; means for summing all claimsprocessed during the episode of care to obtain a total treatment cost;means for determining if the total treatment cost is less than thebaseline value, thus resulting in a cost savings for the decided courseof treatment; means for correlating an original code and a final codefor the episode of care with a time interval between a first visit withthe healthcare provider and a final treatment; means for representingthe cost savings as an incentive payment that is to be apportioned amongthe responsible provider, the payer and the incentive administrator,wherein the incentive payment includes a portion based on the timeinterval; means for causing a first portion of the cost savings to besent to the responsible provider in the form of a monetary incentivethat is individually calculated based on the episode of care, andcorrelated to the total treatment cost; means for causing a secondportion of the cost savings to be sent to the payer, the second portionconstituting a savings in the amount paid out for the course oftreatment; and means for causing a third portion of the cost savings tobe retained by the incentive administrator, wherein at least two of theresponsible provider, the payer, and the incentive administrator areindependent parties.
 14. The apparatus of claim 13 further comprising:means for verifying that the episode of care is not an outlier caserepresenting an extreme condition that costs significantly more than thecost associated with the initial baseline value; and means for adjustingthe initial baseline value by factoring in any effects due tocomorbidity to derive an adjusted baseline value.
 15. The apparatus ofclaim 14 further means for comprising identifying a responsible providerwho performs a defining procedure from among a plurality of healthcareproviders involved in the treatment, and wherein the responsibleprovider is a member of a medical provider group with whom a portion ofthe first portion of the cost savings to be sent to the responsibleprovider is shared.
 16. The apparatus of claim 15 wherein the medicalprovider group is one of a Health Maintenance Organization, anAccountable Care Organization, and an integrated medical services group.17. The apparatus of claim 16 wherein the payer comprises one of aninsurance company, a governmental entity, or a government agent.
 18. Theapparatus of claim 17 further comprising: means for identifying a bestpractice procedure for the episode of care; means for determiningwhether the treatment corresponds with the identified best practiceprocedure; and means for modifying the incentive payment if based oncorrespondence of the treatment with the best practice procedure. 19.The apparatus of claim 18 wherein the best practice procedure is definedby one of an established medical organization, a national medicalorganization, or an academic medical center.